Land Trusts or Land Agents?

Celebrated by market enthusiasts and conservationists alike, land trusts have become the instrument of choice across the nation for conserving farmland, sensitive habitat, and open space. Recently, however, free market environmentalists have been raising a few questions about them.

For years, friends of the market such as PERC associates have cheered trusts because of the way they go about achieving their mission: Trusts rely on voluntary transactions and respect private property rights. They buy land and purchase or receive voluntary donations of land and conservation easements. (See p. 12 for an example of the sophisticated management typical of the Nature Conservancy, the nation’s largest land trust.)

Conservationists, whether market-oriented or not, applaud the mission of protecting land from development and other disturbance. Some 17 million acres of U.S. land is now controlled by land trusts.(1) That’s a lot of habitat, farmland, and open space, an amount close to the size of South Carolina.

Land trusts have been growing dramatically. Prior to 1950 there were fewer than 40 land trusts in the United States. There are now more than 1200 land trusts operating across the 50 states and U.S. territories (Land Trust Alliance 1999).

Small local trusts are found in every state, led by Massachusetts with 137, followed by California with 119 and Connecticut with 113. The local trusts control some four million acres of land. The 14 larger national land trusts control 13 million acres of U.S. land. Indeed, the Nature Conservancy alone claims to have protected 10.5 million acres since its founding in 1953 (Nature Conservancy 1999).

Notice the word "control." Of the 4.7 million acres protected by local and regional trusts, only 17 percent is owned in fee simple. Some 30 percent is controlled by way of conservation easements, and the rest, about 50 percent, is transferred to government or controlled by other means such as through the ownership of mineral rights (Land Trust Alliance 1999).

The breakdown appears to be different for the large national land trusts. Nine of the 14 national trusts provide land management data. They indicate fee simple ownership of just one percent of the land they "control." Some 20 percent is transferred to government, and the remainder is managed by way of conservation easements, deed restrictions, and mineral right ownership (Land Trust Alliance 1998, 197Ð99).

The growth of land trusts raises three issues that environmentalists and conservationists would do well to consider.

First, land trusts don’t always retain the right to divest ownership. Yet this is a key characteristic of private property rights. If land parcels can be transferred, they can be traded and assembled to better achieve environmental objectives. When they are able to do so, land trusts willingly sell or trade land that has been donated to them so that they can acquire more sensitive habitat.

For example, some years ago the Nature Conservancy surprised some observers by selling beachfront property that it had received as a gift. The beachfront land in the Virgin Islands was degraded and damaged and did not have any endangered animals or plants. The conservancy, whose mission was to protect endangered species, traded the beachfront property for Wisconsin land that provided nesting habitat for the hooded warbler, a rare Neotropical migrant bird.(2)

When land is set aside through easements and other agreements rather than through direct ownership, this freedom to divest is lost. Some of the traditional incentives of private property rights weaken. Conservation easements or land donated as a perpetuity freeze the present use of land into the limitless future.

Over time, both the environment and the desires and locations of human populations can change, turning a perpetuity into a millstone. Perhaps it would be wise for donors to require that court-supervised environmental reviews be made every one hundred years with an allowance for selling land that no longer satisfies the donor’s intent.

A second issue is the transfer of land from private ownership to government. The federal government’s track record for managing land is not a stellar one. To select a few examples: Yellowstone’s outmoded sewer system spews sewage into native trout streams and prehistoric dwellings in Mesa Verde National Park are disintegrating from a buildup of oils and airborne particles (Fretwell 1999, 3). And according to a General Accounting Office (1999, 22) report, 39 million acres of national forests are in danger of going up in flames due to poor management.

Managing land properly costs money. When additional land is transferred to governmental bodies, public funds for land management must be stretched even farther.

The issue is incentives, not the character or commitment of government agents. Generally speaking, government managers and the units they manage do not reap rewards for managing resources effectively. Nor are they systematically punished when bad decisions are made.

A third problem to consider is that land trusts are making many large purchases using taxpayer money. Evidence comes from the Interior Department. Between 1985 and 1991, the Department of the Interior made 317 land purchases of land from conservation organizations. These cost $222.6 million in taxpayer funds. In some cases, the department reported, the land was sold to the government at prices that exceeded fair market value (U.S. Department of the Interior 1992, 3).

Such taxpayer-financed purchases cloud the widely held image of trust managers accepting and managing donated land or buying it with funds contributed by dedicated land trust members. It did not sit well with a member of the Nature Conservancy who wrote a letter to the editor of the conservancy’s magazine (the November/December 1999 issue).

The reader fumed about the conservancy’s purchase of 45,000 acres of Florida land using $133.5 million in federal funds: "If the federal government is paying for the Conservancy’s purchases, then you do not need my membership pittance!" wrote Osman Latif. "An explanation would be appreciated."

The letter generated two explanations within the same issue of the magazine. The magazine’s editor responded that donations from individuals "comprise the greatest and most valued source of funding for our work; nevertheless, when an opportunity arises to accomplish our conservation goals with funding from outside sources, we think our members would want us to take full advantage of the opportunity."

In his column, John Sawhill, president of the conservancy, implied an even more expansive role for government funds and government ownership. He noted that the Nature Conservancy "has a long record of working with federal, state and local public agencies to protect ecologically important land and waters," and added that "stewards from the Nature Conservancy collaborate with government officials to promote conservation on all types of public land holdings" (Sawhill 1999, 5). This description differs from the usual concept of a land trust.

For the most part, there is little journalistic scrutiny of how organizations such as the Nature Conservancy operate. However, land trust collaboration with government was described in a series of 1991 columns by the late Warren Brookes, editorial page writer for the Detroit News. For example, Brookes discussed (January 23) a provision that had been added to the Interior Department appropriation bill for fiscal 1988. It required Diamond International Paper Company to sell a 53,000-acre New Hampshire holding to the Nature Conservancy or the Society for the Protection of New Hampshire Forests; if it did not, its land would be purchased by the U.S. Forest Service for $5.25 million. This, Brookes commented, was a fraction of its actual value.

It appears that these two trusts were obtaining help from the federal government. All they had to do was to offer something more attractive than the price demanded by the Forest Service to get a deal. (The conservation group could offer a tax benefit if the land was sold at a loss and in turn gain a "profit" when the land was resold to the government.)

Today, the federal government is dangling before environmental organizations enormous sums of money that can be used to control land use. For example, the 1998 Transportation Equity Act for the 21st Century provides some $630 million for transportation enhancements, which include greenways, bike trails, and open space easements. Millions in matching funds have emerged for the acquisition of wetlands. And billions are being proposed to enrich the Land and Water Conservation Fund, a plan that has received support from Republicans as well as Democrats.

A typical example of the close relationship between government and private organizations was the Forest Service’s 1999 purchase of acreage near Yellowstone National Park. The Rocky Mountain Elk Foundation acted as a facilitator as the Forest Service negotiated the purchase of land from a religious organization, to the tune of about $13 million. The elk foundation, along with the Forest Service, holds a right of first refusal to assist the federal government in acquiring additional land (Rocky Mountain Elk Foundation 1999a and 1999b).

Such programs encourage land trusts to serve as government land agents, often quite profitably. If land trusts continue to respond to this temptation, land conservation will become ever more political. The splendid conservation incentive that comes with bearing costs and earning benefits will be compromised. History teaches us that market incentives for conservation are strongest when individuals pay market prices and receive market rewards. They are weakest when government agents spend someone else’s money and get no reward for good management.

Free market environmentalism is about harnessing property rights and markets for the purpose of managing environmental resources. Beneficial outcomes depend on getting the incentives right and keeping them right.

Notes
1. These figures are based on calculations from data included in Land Trust Alliance (1998, 197Ð99).
2. Brent Haglund, former Wisconsin Nature Conservancy official, e-mail correspondence, November 10, 1999.

Bruce Yandle is a consultant, writer and speaker on economics and political economy. He is Mercatus Center Distinguished Adjunct Professor of Economics at George Mason University and participates regulatory in the Center’s Capitol Hill lecture series. Yandle is Dean Emeritus of Clemson University’s College of Business & Behavioral Science and Senior Fellow Emeritus, Property & Environment Research Center (PERC) in Bozeman, MT. While serving as Alumni Distinguished Professor of Economics at Clemson University, he taught…